The USD/CAD pair shows slight upward gains in early Tuesday trading, breaking a two-day losing streak. The pair is now moving past the 1.4300 mark, recovering from a one-week low of 1.4275 reached the previous day. However, traders remain cautious as key economic events unfold this week.
The US Dollar (USD) is showing signs of modest strength after hitting its lowest level since October 2024. This rebound is largely due to repositioning ahead of major central bank events. Despite this slight recovery, the USD’s gains may be short-lived as expectations grow that the Federal Reserve (Fed) will implement multiple interest rate cuts this year. A dovish Fed stance could limit the USD’s potential for a stronger rally.
Meanwhile, Crude Oil prices continue to hover near a two-week high set on Monday. Geopolitical tensions in the Middle East raise concerns about possible supply disruptions, supporting oil prices. This trend, combined with recent positive developments in US-Canada trade discussions, strengthens the Canadian Dollar (CAD), also known as the Loonie. As a result, the upside for USD/CAD remains restricted, keeping traders cautious.
Market participants are now looking ahead to key economic data releases. The Canadian Consumer Price Index (CPI) report, set for release on Tuesday, could provide fresh direction for the USD/CAD pair. Higher-than-expected inflation in Canada could strengthen the CAD, making it harder for USD/CAD to maintain its current gains.
Additionally, traders are bracing for the outcome of the two-day Federal Open Market Committee (FOMC) policy meeting, concluding on Wednesday. The meeting’s results will offer clearer insights into the Fed’s rate path, potentially influencing USD price action. Until then, USD/CAD traders may remain hesitant to place aggressive bets.
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USD/CAD gains slightly, moving past 1.4300. However, upside remains limited ahead of the Canadian CPI and FOMC meeting.
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